Woolworths Group Limited

Thank you for standing by. Welcome to the Woolworths Group Limited F25 Q1 sales announcement. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Amanda Bardwell, Managing Director and CEO of Woolworths Group. Please go ahead.

Good morning, everyone. Thank you for joining us today for Woolworths Group's first quarter sales results for the 2025 financial year. I'd like to start by acknowledging the traditional custodians of the land on which we meet today, Dharug country, and I'd like to pay my respects to elders past and present. It's a pleasure to be here today with you as Woolworths Group's new CEO. Joining me this morning are Stephen Harrison, our Chief Financial Officer, Spencer Son, Managing Director of Woolworths New Zealand, Sally Copeland, Managing Director of Group E-Commerce X, Von Ingram, Managing Director of W Living, Dan Haig, Managing Director of Big W, Guy Brent, Managing Director of Woolworths Food Company, Paul Harker, Chief Commercial Officer, Australian Food, Annette Carantoni, Chief Supply Chain Officer, Bill Reid, Chief Legal Officer. Now turning to our results. Our customers remain under real cost of living pressure and we delivered much needed value to them during the quarter. We offered our customers more specials with larger savings, increased shelf capacity to improve the availability of our own brand and made it easier for customers to find the best unit prices. We also provided extra value through everyday rewards and brought a little joy to families through our first group-wide collectible program, Disney Worlds of Wonder. We remain committed to providing value to our customers, whether they shop in stores or online. Group sales increased by 4.5%, with solid item growth in our food businesses, along with ongoing strength in e-commerce. Excluding the impact of the recent acquisition of pet stock, group sales increased 3.3%. Pleasingly for customers, food inflation has continued to moderate in Australia and New Zealand, with average prices in quarter one below the prior year for the third consecutive quarter. We saw our customer scores gradually recover over the quarter in Australian food before ending the quarter slightly below the prior year following the announcement of ACCC legal proceedings and the interim report. Group voice of customer NPS ended down one point on the prior year. Looking at the results by business, Australian food total sales increased by 3.8% to 13.6 billion, primarily driven by item growth of 2.1% and strong e-commerce growth of 23.6%. Woolworths food retail total sales in quarter one increased by 3.6% and comparable sales increased by 2.3%. A strong promotional program, improved availability, our Disney collectibles campaign, and increased convenience through e-commerce all contributed to growth. Woolworth Food Company's own and exclusive brand sales grew by 6% in quarter one, materially exceeding the overall sales growth rate as more customers recognized the strong value provided by Own Brand. Long Life Own Brand sales were particularly strong, with 8% growth driven by pantry, frozen food, snacking, and household care. Average prices in quarter one declined by 0.3% compared to the prior year. While fruits and vegetables moved back into modest inflation during the quarter due to cycling abundant supply in the prior year, this was offset by the pass-through of lower livestock prices in meat and deflation in long-line categories such as pantry, freezer and everyday needs, with increased promotional uptake. EcomX sales increased 23.6% to 1.952 billion, with penetration reaching 14.5% in the quarter. Over a million B2C customers have placed an order within the last four weeks, with active customers increasing 16% on the prior year. Digital is the virtual door to our stores and engagement continues to grow strongly. Weekly average traffic to our group digital platforms reached 28.9 million in quarter one, up 16.1% on the prior year, driven by increased use of Woolworths and Everyday Rewards apps. This was supported by a number of innovative new features introduced in the quarter, including watch lists to notify customers when their favorite products go on specials, Voice Product Finder that shows real-time information on products in store, and Scan and Go Trolley, which we're currently trialling in 10 stores. Cartology revenue increased by 15% in the quarter, with strong growth across all channels and banners, particularly in digital. The successful Disney Collectible campaign also contributed to growth, and we completed the rollout of screens in vicinity centres. Rewards and services sales increased 17.7% in quarter one with more than 10 million active everyday rewards members in the quarter and over one million mobile and insurance customers. I'll return to Australian Foods outlook in a bit. Australian B2B sales increased by 6.9% with PFD sales growth remaining strong at 8% driven by growth across all channels Third party primary connect revenue was also strong, reflecting growth from new crosstalk facilities. In New Zealand, customer scores improved further in the quarter, particularly in the key focus areas of value for money and fresh. Total sales increased 2.7% to 2.1 billion New Zealand dollars, with comparable sales growth of 3.4%. Similar to Australian food, item growth and e-commerce sales were strong with sales momentum improving in the second part of the quarter. E-commerce sales increased 15.9% to 317 million, with penetration increasing to 15%, largely driven by growing contribution of milk run and pickup. By the end of the quarter, Everyday Rewards had grown to 1.8 million active members since its launch in February, with scan and tag rates increasing on the prior year as customers recognize the increased value from the program. The rebranding to Woolworths New Zealand from Countdown is progressing well, with 82 stores rebranded by the end of the quarter, and another 52 planned for the remainder of the year. The reporting segment, W Living, was established in the quarter, which comprises Big W, Petstock, Healthy Life, Woolworths Market Plus, Woolworths Market Plus, The group's marketplace platform business includes Everyday Market, My Deal, and Big W Market. W Living sales increased by 17%, reflecting the pet stock acquisition in January 2024. Big W sales declined by 0.9% in the quarter, with strong item growth being offset by lower average selling prices as we increased our range of opening price points, lowered prices, and customers traded down to more affordable options. Comparable sales in home and everyday were up on the prior year, but clothing was impacted by delays in stock receipts in the new spring-summer range. Stock flow has now improved with solid stock position ahead of the key Christmas trading period. Pet stock sales increased approximately 5% compared to the same period in the prior year before Woolworths ownership. Sales growth was driven by item growth as customers looked for value in specials and own brands, particularly in pet food categories. Woolworths Market Plus GMV was $97 million in Q1 F25, up 28.2% on the prior year, largely driven by Big W markets, partially offset by a decline in MyDeal GMV. Big W Market now offers over 200,000 additional products to customers. Turning now to outlook and current trading. As we focused on delivering more value for our customers during the quarter and building sales momentum, promotional activity in Australian food increased as customers responded strongly to specials and in particular, larger savings. While this has contributed to improved sales momentum, It has also led to a lower margin sales mix. Additionally, e-commerce growth has remained stronger than anticipated in the quarter, which has also impacted margins. While we wouldn't normally provide earnings guidance at quarter one, and the key quarter two trade-in period remains ahead of us, Australian food EBIT for the first half is forecast to be below our previous expectations. We currently expect H1 F25 EBIT including 40 million incremental supply chain costs to be within a range of 1.48 billion to 1.53 billion compared to 1.595 billion in H1F24. While only a three-week trading period, Australian food sales growth in October to date has been circa 3%. In New Zealand food, the improved momentum in the quarter has continued into October and Big W sales in October are broadly in line with the prior year. In conclusion, we're pleased with our current trading momentum in the lead-up to the important Christmas and summer trading period. However, as we said in August, we expect trading environment for the rest of F25 to remain challenging. While responding to customer needs and maintaining our trading momentum remains our priority, we are taking steps to improve our financial performance We are optimizing our commercial program to offer compelling value to customers while improving promotional effectiveness as well as adopting prudent cost settings for quarter two. Wage cost growth will remain elevated in F25. However, our productivity program remains on track to help mitigate some of these increases together with an ongoing focus on managing the impact of a growing e-commerce mix. We will also take additional steps in calendar 25 to increase our productivity ambition. Our New South Wales supply chain transformation continues to progress with several major automation projects near completion. We reached an important milestone last week with our first carton out from our Moorbank National Distribution Centre, which is on track to open before Christmas. Our regional distribution centre, on the same site, remains on schedule to go live in F26. And our Auburn Fulfillment Centre is progressing to plan to be operational in the second half of F25. On the regulatory front, we will continue to engage in good faith with a number of government and regulatory inquiries and investigations, including the ACCC. Getting it right for customers is something that I am determined to lead on I'm committed to ensuring our customers continue to choose us every day and in return we will provide them with value, quality, choice and convenience and a level of service that they expect from us. We understand the need to prioritize the areas that can deliver the most impact and simplify the way that we work to deliver strong, long-term, sustainable value for our shareholders. I would also like to take the opportunity to thank our incredible team for their efforts during the quarter. I'll now turn the call over to the operator for questions. To give everyone a chance, can I please ask that you limit it to one question per person and then rejoin the queue with any follow-up questions. Thank you.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from Tom Kerith with Baron Joey. Please go ahead.